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Updated 7 April 2021

Sisvel v Wiko

OLG Karlsruhe
9 December 2020 - Case No. 6 U 103/19

A. Facts

The claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards, which are subject to a commitment to be made accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions (standard-essential patents or SEPs). Sisvel also administrates a patent pool, comprising patents of several SEP holders, including Sisvel's own SEPs (patent pool).

The defendants are two companies that are part of the Wiko group (Wiko). [1] Wiko sells mobile phones complying with the LTE standard - among other markets- in Germany.

In June 2015, the patent pool informed Wiko for the first time about the need to obtain a licence. On 1 June 2016, Sisvel (as the patent pool's administrator) offered Wiko a portfolio licence, which also covered the patent in suit. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (District Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko's liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence limited to its own SEP portfolio to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

In October 2016, Sisvel extended the lawsuit. Claims for injunctive relief as well as the recall and destruction of infringing products were added to the other claims initially asserted.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Some days prior to the oral hearing in the infringement proceedings, Wiko informed the Court that it had provided information to Sisvel and had also deposited a security amount for past uses.

On 8 November 2017, Sisvel made a new offer to Wiko with reduced royalty rates. Wiko did not immediately react to this offer.

On 22 December 2017, Sisvel asked the District Court to order a stay of the infringement proceedings, until the decision of the Federal Patent Court in the parallel nullity proceedings. Wiko agreed with Sisvel's motion. On 30 January 2018, the infringement proceedings were stayed.

On 9 February 2018, Sisvel sent a reminder to Wiko regarding the offer made on 8 November 2017. Wiko responded on 16 February 2018, requesting further claim charts and more time to examine the patents covered by the offer.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing program (2018 offer). Along with the 2018 offer, Sisvel provided Wiko with claim charts regarding 20 selected patents and a list of existing licensees of both its new licensing program and two pre-existing programs. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, following a respective reminder sent by Sisvel on 14 September 2018, Wiko replied, without, however, commenting the 2018 offer; it just referred back to its counteroffer dated 11 November 2016. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees so far.

In response to that claim, Sisvel shared a draft Non-Disclosure Agreement (NDA) with Wiko on 22 October 2018, based on which it would be willing to disclose the names of the existing licensees. Wiko refused to sign the NDA proposed by Sisvel.

In October 2018, the Federal Patent Court upheld the SEP in suit in part. Subsequently, the District Court moved on with the infringement proceedings. After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

In the beginning of September 2019, Sisvel set up an electronic data room containing redacted versions of Sisvel's existing licensing agreements with third parties and granted Wiko respective access rights. Wiko did not make use of this data room at any point in time.

On 4 September 2019, the District Court granted an injunction against Wiko and ordered the removal and destruction of infringing products from the market. It also confirmed Wiko's liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages. Wiko appealed the decision of the District Court.

Shortly after the District Court rendered its decision, the term of the patent-in-suit expired. Sisvel, however, enforced the injunction granted by the District Court.

With the present judgment [2] (cited by http://lrbw.juris.de/cgi-bin/laender_rechtsprechung/list.py?Gericht=bw&GerichtAuswahl=Oberlandesgerichte&Art=en&sid=2b226ea73cc9637362d8e1af04a34d05), the Higher District Court (Oberlandesgericht) of Karlsruhe (Court) predominantly upheld the judgment of the District Court [3] .
 

B. Court's reasoning

The Court found that Wiko could not successfully raise a so-called 'FRAND-defence' based on an alleged abuse of market dominance (Article 102 TFEU) against the claims for injunctive relief and the recall and destruction of infringing products asserted by Sisvel. [4]

This question was still decisive in the present case, despite the fact that the patent-in-suit expired before the start of the appeal proceedings. The Court explained that the expiration of a patent affects only future acts of use (which, then, no longer constitute infringement): On the contrary, claims that had arisen prior to expiration based on acts of use during the lifetime of the patent are not impaired. [5] Whether claims were given before the expiration of the patent-in-suit is of particular importance, especially when the patent holder has enforced a (first-instance) judgment delivered in proceedings conducted within the term of protection of the patent, as it was the case here. [6]
 

Dominant market position

Having said that, the Court agreed with the finding of the District Court that Sisvel had a market dominant position in terms of Article 102 TFEU with respect to the patent-in-suit in the relevant time period prior to its expiration. [7]

The Court followed the District Court also insofar, as it confirmed that, by filing an infringement action, Sisvel had not abused its market dominance.
 

Notification of infringement

In the eyes of the Court, Sisvel had sufficiently notified Wiko about the infringement of the patent-in-suit prior to filing a court action. [8] The purpose of the notification of infringement is to draw the implementer's attention to the infringement and the necessity of taking a license on FRAND terms and conditions. [9] In terms of content, the notification must identify the patent infringed, the form of infringement and also designate the infringing embodiments. [9] Detailed technical or legal analysis of the infringement allegation is not required. [9] The production of so-called 'claim charts', which is common in practice, will, as a rule, suffice, but is not mandatory. [9] If the patent holder offers a portfolio licence, respective extended information duties occur. [9]

In the present case, it was not disputed that Sisvel had notified Wiko about the patent-in-suit prior to litigation. [10] As far as Wiko complained that no claim charts were presented before trial, the Court reiterated that no respective obligation of Sisvel existed. [11] What is more, the Court held that the court action initially filed by Sisvel, which did not include claims for injunctive relief and the recall and destruction of infringing products, could also be seen as an adequate notification of infringement. [10]
 

Willingness to obtain a licence

The Court then found that Wiko behaved as an unwilling (potential) licensee both prior and during the infringement proceedings [12] . The Court agreed with the assessment of the District Court that Wiko delayed the licensing negotiations between the parties with the goal to avoid taking a licence for as long as possible, in order to gain economic benefits. [13]

According to the Court, the 'expression of a general willingness to license' is not sufficient for assuming that an implementer is a 'willing licensee'. [14] Moreover, the implementer must 'clearly and unambiguously' declare willingness to conclude a license agreement on FRAND terms, 'whatever FRAND terms may actually look like" [14] . The respective declaration must be 'serious and unconditional'. [14]

The Court highlighted that for the assessment of willingness the overall facts and the particular conduct of the implementer shall be taken into account. [14] Willingness is not 'static': the finding that an implementer was willing (or unwilling) at a certain moment in time does not remain unchanged henceforth. [14]

The implementer must always be willing to obtain a licence and participate in negotiations in a 'target-oriented manner'; since implementers might be inclined to delay negotiations until the expiration of the patent-in-suit, there is a need to make sure that their behaviour in negotiations will not lead to delays. [15] Moreover, it should be expected that a willing implementer would seek a license as soon as possible, in order to shorten the period, in which it makes use of the patent-in-suit or the SEP holder's portfolio without authorisation and without paying licensing fees. [16] Accordingly, a willing licensee would not consider the 'negotiation obligations' of the SEP holder primarily as a means to defend itself against a court action, but as a means to utilize in order to reach a FRAND agreement, if needed. [16]

In the view of the Court, the above requirements are in line with the Huawei v ZTE judgment (Huawei judgment or Huawei) [17] of the Court of Justice of the EU (CJEU). [18] In Huawei, CJEU focused on the will of the infringer to conclude a license agreement on FRAND terms and emphasized that the latter must not pursue 'delaying tactics'. The Court explained that, although in Huawei the requirement to refrain from 'delaying tactics' is expressly mentioned only with respect to the duty of the implementer to react to a licensing offer of the SEP holder, it applies 'at all times' as long as the implementer uses the patents without a licence; otherwise, the suspension of SEP holder's right to the injunctive relief cannot be justified. [19]

In this context, the Court pointed out that not every 'reluctant involvement' of the implementer in licensing discussions will necessarily allow for the assumption of unwillingness. [20] Such behaviour could be justified in individual cases, especially when the SEP holder does not act in a 'target-oriented' manner itself. [20] Nevertheless, implementers must, as a rule, react timely even to a belated action of the SEP holder. [20] Furthermore, implementers must, in principle, inform the SEP holder of any objections at an early stage and should not wait to raise those much later in court proceedings. [20]

Looking at Wiko's conduct, the Court criticized especially the fact that it became active mostly as a reaction to new developments in the pending infringement proceedings. [21] A willing implementer would have, however, sought a licence independently of the initiation of legal steps and independently of the course of litigation. [22] As an example, the Court highlighted the fact that Wiko's counteroffer dated 11 November 2016 was made only shortly after Sisvel extended the infringement suit by adding a claim for injunctive relief. [23] Wiko also provided information on past acts of infringement only a few days prior to the first oral hearing in February 2017 (and refrained from constantly updating this information afterwards, as it would be expected by a willing licensee). [24]

The Court identified also further facts that indicate that Wiko engaged in delaying tactics. [25] Wiko reacted to Sisvel's licensing offers made during the course of the proceedings always belatedly and only after a reminder by Sisvel (for instance, it took Wiko more than three months to react to the 2018 offer) [26] . It also demanded further claim charts in February 2018, years after the action was filed. [27]

Wiko's refusal to sign the NDA offered by Sisvel -despite multiple reminders of the latter- without providing any reasons was also considered as a sign of unwillingness. [28] According to the Court, it should be expected by a willing licensee, who is not interested in delaying negotiations, to swiftly raise any criticisms regarding an NDA proposed by the SEP holder in writing or by e-mail, and not wait to raise any concerns several months later in the infringement proceedings, as Wiko had done here. [29] The Court also considered the fact that Wiko did not access the electronic data room set up by Sisvel containing redacted versions of Sisvel's third party agreements as an additional indication of unwillingness. [30]

Furthermore, the Court clarified that -contrary to Wiko's view- school holidays and/or staff shortages cannot provide sufficient justification for delays in negotiations. [31] Even if such circumstances occur, a willing implementer would have communicated any obstacles immediately. [31] Wiko failed to do so.
 

SEP holder's offer

Since Wiko was found to have been an unwilling licensee, the Court explained that the question whether Sisvel fulfilled its duty to make and adequately elaborate a FRAND licensing offer, was no longer decisive. [32] In fact, no such duty had arisen in the present case, due to Wiko's unwillingness to obtain a licence. [32] Notwithstanding the above, the Court provided guidance on the content and extend of the respective obligation of the SEP holder.

The Court first explained that FRAND is a 'range', which leaves room for flexibility. [33] As a rule, FRAND is determined in bilateral good faith negotiations between SEP holders and implementers, taking into account the specific circumstances of each individual case [33] ; indeed, parties are best situated to determine the exact content of FRAND in a specific setting. [33]

In order to meet its obligation, an SEP holder must present an offer to a willing licensee, which 'in general' complies with FRAND requirements and is fair, reasonable and not discriminatory with respect to the 'average licensee'. [34] The SEP holder shall further explain its offer in a way that permits the licensee to understand the assumptions, on which the offered rate and further conditions are based. [35] The rationale behind this obligation is to create a sufficient basis of information for the implementer for assessing the offer and eventually formulating a counteroffer. [36]

In this context, the Court made clear that implementers should not expect that the SEP holder individually adapts its (first) offer to the specific circumstances of each particular case. [37] The SEP holder's FRAND commitment does not give rise to such obligation. [37] The (first) offer is intended to launch the negotiations and provide an adequate information basis to the implementer, who will then be in a position to suggest necessary amendments by means of a counteroffer. [37] Accordingly, it will regularly be acceptable that the SEP holder's offer is 'not clearly and evidently' non-FRAND and sufficient information was provided to the implementer. [38]

The Court dismissed the notion that the implementer is obliged to negotiate (and eventually) make a counteroffer, only when the SEP holder's offer was fully FRAND-compliant. [38] This would bring the negotiations to a stand-still and, therefore, conflict with the spirit of the Huawei judgment, which is to encourage the parties to reach agreement on the licensing terms. [39] Moreover, the Court explained that –irrespective of whether the offer triggers an obligation of the implementer to submit a counter-offer– the latter will be regularly required, at least, to analyse the SEP holder's offer in due course and express any objections and queries without delay. [40]

Against this background, the Court found that none of the offers made to Wiko during the infringement proceedings was 'clearly and evidently' non-FRAND. [41] The fact that the offers did not define the start of the contract or the amount of royalties payable for past uses was not considered problematic. [42] The Court also found that the royalty rates offered were not 'evidently non-FRAND', since they were sufficiently substantiated by reference to existing licensing agreements and calculated on basis of a 'top-down' method. [43] A need to calculate royalties on grounds of the costs that incurred for the creation of the patented invention (cost-based approach) was not given, since this factor was not relevant for establishing value. [44]

In addition, the Court did not raise any concerns against the fact that Sisvel's offer concerned a worldwide portfolio licence: On the one hand, agreements with such scope are common in the telecommunications industry. [45] On the other hand, Wiko had worldwide activities, so that a licence with a limited scope would not provide sufficient coverage. [45]

The fact that some of the patents included in Sisvel's portfolio were -allegedly- not standard-essential did not render the offers 'un-FRAND'. [46] The Court stressed that, for the purpose of licensing negotiations and the conclusion of a licence, it is not necessary to conclusively clarify whether each portfolio patent is standard-essential. [47] Implementers can reserve the right to challenge the validity and essentiality of affected patents even after the conclusion of a licensing agreement. [47]

Similarly, the Court had no objections against a clause placing the burden of proof with regard to the exhaustion of licenced patents on Wiko. [48] This rule corresponds with the common allocation of the burden of proof under German law and does not place unreasonable weight on the licensee, since it will be better situated to trace the licensing chain by engaging with its suppliers. [49]

The question whether an adjustment clause is necessary for an offer to be considered FRAND was left unanswered by the Court. [50] Such clause would allow the implementer to adapt the agreed royalties, in case that patents fall out of the scope of the licence (e.g. due to expiration or invalidation). The Court saw no need for a respective contractual provision, since the licences offered by Sisvel would expire and, therefore, be re-negotiated after five years. [50] The Court did not express any concerns against the term of the offered licence or the termination clauses contained therein, either. [51]

Furthermore, the Court made clear that Sisvel had adequately elaborated the licensing rates offered to Wiko. [52] In the infringement proceedings, Sisvel responded to the 'top-down' calculation of Wiko in detail and made relevant clarifications. [53] According to the Court, Sisvel was under no circumstances obliged to elaborate on a cost-based calculation of royalties, as requested by Wiko; such demand was considered just another means to delay negotiations. [54]
 

Implementers' counteroffer

The Court also found that the counteroffers made by Wiko during the course of the first instance infringement proceedings were not FRAND. [55]

The Court highlighted that the obligation of the implementer to submit a FRAND counteroffer to the SEP holder is already triggered, when the previous licensing offer of the latter is not 'clearly and evidently' non-FRAND and sufficient information was provided, enabling the implementer to formulate its counteroffer. [56]

Having said that, the Court took the view that the royalty rates which Wiko offered were very low and, thus, not FRAND-compliant. [57] The Court criticized especially the fact that the rates were significantly lower than the rates which were considered to be adequate in previous court decisions. [58] Notwithstanding the above, the Court explained that, even if Wiko's counteroffer had been FRAND, this would not change the conclusion that Wiko had acted as an unwilling licensee. [59] According to the Court, a willing licensee would not have submitted a counteroffer around one year after receipt of the SEP holder's offer, as Wiko did. [60]
 

C. Other important issues

The Court stressed that for generating pressure-free licensing negotiations during pending infringement proceedings, it will, as a rule, be sufficient, if the proceedings are stayed with a view to parallel nullity proceedings concerning the patent-in-suit. [61] This is particularly true, when the SEP holder takes the respective initiative, as it was the case here. [61] Nevertheless, even if a pressure-free negotiation situation is not given, the infringers is not released from the obligation to act in good faith and engage in licensing negotiations, for instance by analysing a licensing offer of the SEP holder. [61] The refusal of the infringer to act accordingly could, in the eyes of the Court, allow the conclusion that it is an unwilling licensee. [61]

Apart from that, the Court confirmed that Wiko had no legal ground for requesting full disclosure of Sisvel's third party agreements [62] . Even if one would recognize a duty of the SEP holder to share information about the core content of existing licensing agreements (that are still in force), it is questionable whether this duty would also extend to agreements signed by previous patent holders. [63] The Court expressed particular doubts that this applies in cases in which a portfolio was assembled from patents acquired from different patent holders, since the relevance of bilateral or pool licensing agreements of the former patent holder can be limited in this case. [64]

Furthermore, the Court expressed the view that under German law a so-called 'covenant not to sue' does not have the effect of a (royalty-free) licence: such agreements will, as a rule, have only a procedural effect in terms of a pactum de non petendo, excluding only the initiation of court proceedings. [65]

Finally, the Court denied Wiko's motion to order a stay in the appeal proceedings due to the recent referral of several questions regarding the interpretation of the Huawei framework to the CJEU by the District Court of Düsseldorf in the matter Nokia v Daimler [66] . [67] According to the Court, it appears unlikely that the CJEU will establish criteria, by which SEP-based court actions against implementers engaging in delaying tactics would amount to an abuse of market dominance. [68]
 

  • [1] The action was extended to a third defendant, an individual person, who had served as a managing director for both aforementioned companies.
  • [2] Sisvel v Wiko, Higher Regional Court Karlsruhe, judgment dated 9 December 2020, Case-No. 6 U 103/19
  • [3] The claims for injunctive relief, rendering of accounts and damages asserted against the former managing director of the two Wiko companies were limited to the period of time until the end of its tenure; ibid, paras. 265-288.
  • [4] Ibid, para. 289.
  • [5] Ibid, paras. 284 et seqq.
  • [6] Ibid, para. 287.
  • [7] Ibid, paras. 290 et seq. Insofar, the Court made clear that a market dominant position ceases to exist after the expiration of the relevant patent.
  • [8] Ibid, paras. 292 et seqq.
  • [9] Ibid, para. 293.
  • [10] Ibid, para. 297.
  • [11] Ibid, paras. 297 et seq.
  • [12] Ibid, para. 299.
  • [13] Ibid, para. 299 and paras. 320 et seqq.
  • [14] Ibid, para. 301.
  • [15] Ibid, para. 302.
  • [16] Ibid, para. 303.
  • [17] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [18] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 304.
  • [19] Ibid, para. 304.
  • [20] Ibid, para. 305.
  • [21] Ibid, paras. 321 et seqq.
  • [22] Ibid, para. 321.
  • [23] Ibid, para. 322.
  • [24] Ibid, paras. 323 et seq.
  • [25] In addition, the Court found that Wiko’s lack of willingness to obtain a license is also manifested in the fact that it (i) attempted to impede the enforcement of the first instance ruling of the District Court by questionable means (para. 335) and (ii) did not accept the offer of the District Court of The Hague, in which proceedings between the parties were pending in parallel, to engage in settlement negotiations (para. 336).
  • [26] Ibid, paras. 325, 328 and 331.
  • [27] Ibid, para. 327.
  • [28] Ibid, paras. 333 et seqq.
  • [29] Ibid, paras. 334 and 338.
  • [30] Ibid, paras. 337 and 341 et seqq.
  • [31] Ibid, para. 330.
  • [32] Ibid, para. 342.
  • [33] Ibid, para. 307.
  • [34] Ibid, para. 308.
  • [35] Ibid, paras. 308 and 310.
  • [36] Ibid, para. 309.
  • [37] Ibid, para. 310.
  • [38] Ibid, paras. 311 et seqq.
  • [39] Ibid, paras. 311 and 313 et seqq.
  • [40] Ibid, paras. 316 et seqq.
  • [41] Ibid, para. 352.
  • [42] Ibid, para. 353.
  • [43] Ibid, paras. 354 et seqq.
  • [44] Ibid, para. 358.
  • [45] Ibid, para. 359.
  • [46] Ibid, para. 360.
  • [47] Ibid, para. 361.
  • [48] Ibid, para. 362.
  • [49] Ibid, para. 363.
  • [50] Ibid, paras. 365 et seqq.
  • [51] Ibid, paras. 367 et seqq.
  • [52] Ibid, para. 366.
  • [53] Ibid, para. 344.
  • [54] Ibid, para. 346.
  • [55] Ibid, paras. 379 et seqq.
  • [56] Ibid, para. 311.
  • [57] Ibid, paras. 379 et seqq.
  • [58] Ibid, para. 380.
  • [59] Ibid, para. 378.
  • [60] Ibid, para. 384.
  • [61] Ibid, para. 348.
  • [62] Ibid, para. 389.
  • [63] Ibid, paras. 389 et seq.
  • [64] Ibid, para. 391.
  • [65] Ibid, paras. 260 et seqq.
  • [66] Nokia v Daimler, District Court of Düsseldorf, order dated 26 November 2020, Case No. 4c O 17/19.
  • [67] Sisvel v Wiko, Higher Regional Court of Karlsruhe, judgment dated 9 December 2020, para. 395.
  • [68] Ibid, para. 395.

Updated 26 July 2021

Nokia v Daimler

OLG Karlsruhe
12 February 2021 - Case No. 6 U 130/20

A. Facts

The claimant is part of the Nokia group with headquarters in Finland (Nokia). Nokia is a major provider of telecommunication services and holds a significant portfolio of patents declared as (potentially) essential to the practice of various wireless telecommunication standards (standard essential patents, or SEPs) developed by the European Telecommunications Standards Institute (ETSI).

The defendant, Daimler, is a German car manufacturer with a global presence. Daimler produces and sells cars in Germany with connectivity features which implement standards developed by ETSI.

Nokia declared the patent involved in the present case as essential for the 4G/LTE Standard towards ETSI. ETSI requires patent holders to commit to make patents that are or might become essential to the practice of a standard accessible to users on fair, reasonable and non-discriminatory (FRAND) terms.

In June 2016, Nokia informed Daimler about its SEP portfolio. In November 2016, Nokia made a first licensing offer to Daimler. In December 2016, Daimler replied that it would be more efficient to license suppliers manufacturing the so-called 'Telematics Control Units' (TCUs), which are built into Daimler's cars. From January 2017 until February 2019, Daimler did not engage in further negotiations with Nokia.

In February 2019, Nokia made a second licensing offer to Daimler which was also rejected.

In March 2019, Nokia filed infringement actions against Daimler before the District Court of Mannheim (District Court). Further cases were filed before the District Courts of Munich and Duesseldorf.

On 9 May 2019, shortly after the infringement proceedings were initiated, Daimler made a counteroffer to Nokia (first counteroffer) which was rejected. On 10 June 2020, Daimler made a further counteroffer that did not include specific royalty rates (second counteroffer). Nokia would be granted the right to unilaterally determine the royalties payable under the licence, whereas Daimler would have the option to contest Nokia's royalty determination before court. An agreement on these terms was not signed.

On 18 August 2020, the District Court granted an injunction against Daimler and further recognised Daimler's liability to pay damages on the merits. [69] The Court also ordered Daimler to render accounts and provide information necessary for the calculation of damages to Nokia.

Daimler appealed the decision of the District Court. It also filed a request for a stay of the enforcement of the injunction granted until the conclusion of the appeal proceedings.

With the present judgment [70] (cited by http://lrbw.juris.de), the Higher District Court of Karlsruhe (Appeal Court) found in favour of Daimler, ordering a stay of the enforcement of the injunction.
 

B. Court's reasoning

The Appeal Court placed particular focus on the reasoning, on which the District Court relied upon for dismissing the so-called 'FRAND-defence' raised by Daimler against Nokia's claim for injunctive relief. Daimler had argued that by filing infringement actions, Nokia had abused its dominant market position in violation of Article 102 of the Treaty on the Functioning of the EU and should, therefore, be denied an injunction. The District Court held that Daimler could not invoke this argument, since it had failed to sufficiently express willingness to obtain a FRAND licence from Nokia in accordance with the requirements established by the European Court of Justice (CJEU) in the matter Huawei v ZTE [71] (Huawei decision, or framework).
 

Willingness

The Appeal Court did not contest the standard applied by the District Court for the assessment of willingness: the implementer is expected to 'clearly' and 'unambiguously' declare that it is willing to sign a licence with the SEP holder 'on whatever terms are in fact FRAND' and, subsequently, engage in licensing negotiations in a 'target-oriented' manner. [72] The Appeal Court also agreed with the view expressed by the District Court that the declaration of willingness cannot be made subject to conditions. [73] Furthermore, it reasoned that willingness is not a 'one-off event', meaning that the implementer is required to constantly engage in negotiations in a 'serious and target-oriented' manner and to avoid 'delaying tactics'. [73]
 

Implementer's counteroffer

The Appeal Court also confirmed that the implementer's counteroffer is a factor that can be considered for the assessment of willingness [74] . On the one hand, a FRAND-compliant counteroffer could, in principle, 'heal' the initial 'unwillingness' of the implementer. [75] On the other hand, a counteroffer that is not FRAND can reinforce the finding of missing willingness. [75] Having said that, the Appeal Court held that the District Court erred as far as it assumed that Daimler's second counteroffer was not sufficient to 'heal' the unwilling behaviour displayed by Daimler up to the point in time, in which this counteroffer was made. [76] The Appeal Court pointed out that – contrary to the District Court's view – a counteroffer which does not specify concrete licensing fees but instead grants the patent holder the right to unilaterally determine the royalties and – at the same time – allows the implementer to challenge such determination before court in subsequent proceedings (Sec. 315 of the German Civil Code), should regularly be considered as a sufficient declaration of willingness to sign a licence 'on whatever terms are in fact FRAND'. [77] According to the Appeal Court, the fact that by such counteroffer the implementer does not back down from the own perception of how FRAND terms should look like and will, therefore, most likely contest the royalties unilaterally determined by the SEP holder is, as a rule, not harmful: the SEP holder will in any case receive either the royalties it determined or the royalties deemed to be reasonable by the court which will be called upon by the implementer to examine the royalty determination undertaken by the patent holder. [78]

In the eyes of the Appeal Court, the fact that in the above scenario the (final) determination of FRAND royalties is postponed to subsequent proceedings following the patent infringement trial does not per se suffice to question the willingness of the implementer. [79] The Appeal Court rather highlighted that it would regularly serve the interests of the SEP holder to 'unburden' the infringement trial from the FRAND determination, which would lead to a quicker judgment on the infringement issues. [79]

Furthermore, the Appeal Court disagreed with the view previously taken by the District Court, according to which a counteroffer without specific royalty calculation could be (mis-)used by implementers as a means for delaying the signing of an agreement until after the expiration of the patent in suit, in order to secure a more favourable position in negotiations absent the threat of an injunction. [80] The Appeal Court pointed out that, if a licence stipulating a unilateral royalty determination right in favour of the SEP holder is concluded, the latter will receive royalties for the use of its patents; in the court proceedings following the infringement trial only the actual amount of the royalties payable will be determined. [80]

Notwithstanding the above, the Appeal Court made, however, clear that a counteroffer containing no specific royalties can, nevertheless, be an indication of unwillingness in individual cases, especially when it is belated. [81] This could be true, when the counteroffer is made only after infringement proceedings have been initiated by the patent holder. Although it is, in principle, thinkable to remedy flaws during pending infringement proceedings, a counteroffer made after the trial has begun would be unacceptable, if it is part of delaying tactics on the side of the implementer. [82] The Appeal Court found that this approach is in line with the Huawei judgment. [83]

In this context, the Appeal Court pointed out that a counteroffer without specific royalty calculation, which could be sufficient for establishing willingness, does not necessarily also suffice for complying with the further going obligation of the implementer under the Huawei framework to make an own offer on FRAND terms to the SEP holder, if it chooses to reject the licensing offer of the latter. [84] In the present case, the Appeal Court did not take a closer look at this question, since the District Court had not examined whether Daimler had been obliged to make a FRAND counteroffer after rejecting Nokia's licensing offers. [84]

  • [69] Nokia v Daimler, District Court (Landgericht) of Mannheim, judgment dated 18 August 2020, Case-No. 2 O 34/19.
  • [70] Nokia v Daimler, Higher District Court (Oberlandesgericht) of Karlsruhe, judgment dated 12 February 2021, Case-No.6 U 130/20.
  • [71] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [72] Nokia v Daimler, Higher District Court of Karlsruhe (footnote No. 2), para.43.
  • [73] Ibid, para. 43.
  • [74] Ibid, paras. 45 et seq.
  • [75] Ibid, paras. 46.
  • [76] Ibid, para. 47.
  • [77] Ibid, para. 51.
  • [78] Ibid, para. 52.
  • [79] Ibid, para. 53.
  • [80] Ibid, para. 54.
  • [81] Ibid, para. 55.
  • [82] Ibid, para. 56.
  • [83] Ibid, para. 57.
  • [84] Ibid, para. 61.

Updated 20 October 2020

Sisvel v Wiko

LG Mannheim
4 September 2019 - Case No. 7 O 115/16

A. Facts

The Claimant, Sisvel, holds patents declared as (potentially) essential to the practice of the UMTS and LTE wireless telecommunications standards under a commitment to be made accessible to standard users on Fair, Reasonable and Non-Discriminatory (FRAND) terms and conditions (Standard Essential Patents or SEPs). Sisvel administrates a patent pool comprising patents of several SEP holders, including Sisvel’s own SEPs (patent pool).

The Defendants are the French parent company and the German subsidiary of the Wiko group (Wiko). Wiko sells mobile phones implementing the LTE standard –among other markets– also in Germany.

In June 2015, Sisvel informed Wiko about the patent pool and the need to obtain a licence. The parties entered into licensing discussions. Sisvel provided Wiko with information about the SEPs included in the patent pool, including claim charts illustrating the standard-essentiality of a number of these patents. On 1 June 2016, Sisvel made an offer for a licence covering the patent pool to Wiko. Agreement was, however, not reached.

On 22 June 2016, Sisvel brought an action against Wiko before the District Court (Landgericht) of Mannheim in Germany (Court) based on one patent reading on the LTE standard (infringement proceedings). Sisvel requested a declaratory judgment confirming Wiko’s liability for damages on the merits, as well as information and rendering of accounts.

On 23 June 2016, Sisvel made an offer for a bilateral licence covering only its own SEPs to the German subsidiary of Wiko. This offer was not accepted. Moreover, Wiko filed a nullity action against the SEP in suit before the German Federal Patent Court (nullity proceedings).

On 4 October 2016, Sisvel amended its claims in the infringement proceedings. It raised, additionally, claims for injunctive relief as well as the removal and subsequent destruction of infringing products from the market.

On 11 November 2016, Wiko made a counteroffer to Sisvel. Subsequently, Wiko provided security as well as information to Sisvel in accordance with its counteroffer.

During the course of the proceedings, Sisvel made a new offer for a pool licence to Wiko which contained reduced royalty rates. Wiko rejected this offer as well. On 22 December 2017, Sisvel asked the Court to order a stay of the infringement proceedings, until the German Federal Patent Court rendered its decision on the validity of the SEP in suit in the parallel nullity proceedings. Wiko agreed with Sisvel’s motion. On 30 January 2018, the infringement proceedings were stayed by order of the Court.

On 26 June 2018, during the stay of the infringement proceedings, Sisvel made another licensing offer to Wiko based on a new restructured licensing programme designed by Sisvel in the meantime (2018 offer).

Along with the 2018 offer, Sisvel provided Wiko –among other information– with claim charts regarding twenty selected patents as well as a list of existing licensees of both its new licensing programme and two pre-existing programmes. The list contained the date of the conclusion of each agreement as well as the agreed licence fees. The names of the licensees were, however, redacted.

Wiko did not react to the 2018 offer for more than three months. On 15 October 2018, Wiko replied to Sisvel, without, however, providing any feedback on the content of the 2018 offer; it just referred back to its counteroffer dated 11 November 2016, instead. Wiko also criticized the fact that Sisvel did not disclose the names of the existing licensees in the list that it had shared along with the 2018 offer.

In response to that claim, Sisvel sent a draft Non-Disclosure Agreement (NDA) to Wiko on 22 October 2018. Sisvel was willing to disclose the names of the existing licensees upon signing of the NDA by Wiko. Wiko refused, however, to sign the NDA proposed by Sisvel.

In October 2018, the German Federal Patent Court upheld the SEP in suit in part. Subsequently, the Court moved on with the infringement proceedings, discussing in particular the FRAND-related issues.

After the end of the oral hearings in July 2019, Wiko made a new counteroffer to Sisvel and provided the latter with additional information. However, Wiko did not increase the amount of security deposited after its first counteroffer dated 11 November 2016.

With the present judgment [85] , the Court granted an injunction against Wiko and ordered the removal and subsequent destruction of infringing products from the market. The Court also confirmed Wiko’s liability for damages on the merits and ordered Wiko to provide Sisvel with information required for the calculation of damages.


B. Court’s reasoning

The Court found that Wiko’s products infringe the patent in suit [86] . The essentiality of the patent in suit was not in dispute between the parties [87] .

The Court further held that Article 102 of the Treaty for the Functioning of the EU (TFEU) does not prevent Sisvel from enforcing the claims for injunctive relief as well as the recall and destruction of infringing products asserted in the infringement proceedings. Wiko had argued that by filing the present lawsuit, Sisvel had abused its dominant market position in violation of Article 102 TFEU.

In the Court’s eyes, this was not the case, since Sisvel had fulfilled the conduct obligations stipulated by the Court of Justice of the EU (CJEU) in the matter Huawei v ZTE [88] (Huawei framework or obligations). Wiko, on the other hand, had, according to the Court, failed to comply with the Huawei framework.

Huawei framework

In deviation from its earlier case-law, the Court expressed the view that the Huawei obligations can be remedied by the parties during the course of infringement proceedings [89] . This requires, however, that pressure-free negotiations between the parties are enabled, as requested by the CJEU. For this, the parties have to use available procedural instruments for a temporary suspension of the proceedings, such as a motion for suspension of the trial [90] or a consensual stay of the proceedings until the decision of the Federal Patent Court on a parallel nullity action [91] .

Against this background, the Court requested from a SEP holder, who seeks to remedy information obligations under the Huawei framework after the initiation of infringement proceedings, to file a motion for suspension of the trial [91] . In case such a motion is filed, the Court expects that a ‘willing’ implementer will consent to a suspension of the proceedings [91] .

The Court observed that granting the parties the opportunity to remedy shortcomings concerning the Huawei obligations in the course of pending infringement proceedings is in line with the ‘safe harbour’ approach adopted by both the Court of Appeal of England and Wales in Unwired Planet v Huawei [92] and the Court of Appeal of The Hague in Philips v Asus [93] . These courts do not consider the Huawei framework as a mandatory formalistic procedure that needs to be executed strictly; accordingly, deviations from the negotiation framework established by the CJEU do not necessarily amount to abusive behaviour, barring the patent holder from asserting claims for injunctive relief [94] . Moreover, whether this is the case, needs to be assessed on a case by case basis [95] .


Notification of infringement

Having said that, the Court found that Sisvel had fulfilled its Huawei obligation to notify Wiko about the infringement of the SEP in suit prior to the commencement of the infringement proceedings.

Regarding the content of SEP holder’s respective notification, the Court, basically, applied the same requirements set forth in previous decisions. The Court found that such notification must (1) name the patent in suit, including the patent number, (2) inform that the patent has been declared standard- essential towards the relevant standardisation body, (3) indicate for which standard the patent is essential and (4) explain which technical functionality of the user’s products or services implements the standard [96] . The appropriate level of detail should be determined on a case by case basis [96] . The Court confirmed that the patent holder will, as a rule, meet its notification duty by making claims charts customarily used in SEP licensing negotiations available to the implementer [96] . The Court further affirmed that a notification addressed to the parent company within a group of companies will usually be sufficient under the Huawei framework [96] .


SEP holder’s offer

The Court found that Sisvel had also complied with its Huawei obligation to make a written and specific FRAND licensing offer to Wiko. For the respective assessment, the Court considered only the 2018 offer, the last offer made by Sisvel to Wiko during the stay of the infringement proceedings [97] .

To begin with, the Court reiterated its position that infringement courts are not obliged to determine which concrete licensing fees and further contractual terms and conditions are ‘under objective aspects’ FRAND [98] . Contrary to the view previously taken by the superior Higher District Court of Karlsruhe, the Court maintained that the CJEU did not intend to ‘burden’ the proceedings concerning injunctive relief and the recall of products with the ‘precise mathematical determination’ of FRAND conditions [99] . Moreover, since there is a ‘range’ of potential FRAND conform terms and conditions, a request for injunctive relief could conflict with Article 102 TFEU only in case, in which – under consideration of the specific bargaining situation and market conditions – the SEP holder’s offer would amount to an ‘exploitative abuse’ [98] . Insofar, the Court shared a similar understanding with the Court of Appeal of England and Wales in Unwired Planet v Huawei [92] .

Notwithstanding the above, the Court made clear that infringement courts should go beyond a just ‘superficial’ assessment of the FRAND conformity of SEP holder’s licensing offer. Infringement courts should examine, whether the overall structure of the concrete offer would require from an implementer acting in good faith to respond to that offer, irrespective of the – typical – initial divergence of the bargaining position of the parties [100] . As a rule, such a duty will emerge, when the SEP holder explains the royalty calculation in a way that demonstrates the reasons for which it considers that its offer is FRAND [101] . In case that a pool licensing programme or a standard licensing programme exists, it will usually be enough to demonstrate the acceptance of the respective programme in the market. If a sufficient number of licences has been granted by the pool, the patent holder will just have to outline the composition of the pool by presenting an adequate number of claim charts referring to patents included in the pool [102] .

In this context, the Court pointed out that any allegations raised by the implementer with respect to the FRAND conformity of the patent holder’s offer cannot, in principle, be based on the (alleged) unlawfulness of individual contractual clauses. Moreover, the FRAND compliance of an offer must be assessed based on a general overview of the overall agreement [103] . An exception only applies, when a specific clause has an ‚unacceptable effect’ [103] . In the present case, the Court found that none of the clauses contained in the 2018 offer had such effect [103] .

In particular, the Court held that a clause placing the burden of proof with regard to the exhaustion of patents covered by the offered licence on the licensee (here: Wiko) is acceptable [104] . Contrary to the view taken by the District Court of Duesseldorf in a similar case, the Court argued that it is appropriate to request the licensee to establish the relevant facts, since it will be better situated to trace the licensing chain by engaging with its suppliers [104] .

Furthermore, the Court did not consider that a clause limiting the term of the offered licence to five years had an ‘unacceptable effect’ from an antitrust perspective. The Court found that a term of five years is in line with the prevailing practice in the wireless telecommunications industry, in which rapid technological developments are typical [105] .

The Court further pointed out that a clause establishing a right for the extraordinary termination of the licensing agreement in case of violation of reporting duties by the licensee or a delay of payments exceeding 30 days did not have an ‘unacceptable effect’ in the above sense [105] .

The Court did not raise any objections against the fact that the 2018 offer did not contain a clause stipulating an adjustment of the agreed royalty rates in case of changes in the number of covered patents during the term of the agreement. According to its view, including such a clause in a FRAND licence is not per se required [105] . An exception should be made, however, in cases, in which the pool predominantly consists of patents that will expire soon after the signing of the licence agreement [105] . In general, the absence of an ‘adjustment’ clause will not be problematic, especially when the licensing offer does not limit or exclude the statutory right of the parties to request an adjustment of the licence due to frustration of the contractual base (Sec. 313 para. 1 German Civil Code) [105] .


Non-discrimination / confidentiality

Referring to the non-discriminatory element of a FRAND licensing offer, the Court expressed the view that Art. 102 TFEU establishes a (secondary) duty of the patent holder to show in pending infringement proceedings that its offer to the defendant does not discriminate the latter in relation to similarly situated competitors [102] .

The Court made, nevertheless, clear that this duty does not legally entail ‘full transparency’ in every given case [102] . The antitrust obligations of the SEP holder do not always outweigh confidentiality interests of the latter that are worthy of legal protection; moreover, the special circumstances of the individual case can require protection of confidentiality [102] .

Looking particularly at information contained in existing licensing agreements of the SEP holder with third similarly situated licensees (comparable agreements), the Court took the view that the extent of the patent holder’s obligation to disclose such agreements shall be determined by the infringement court on a case by case basis under consideration of both parties’ pleadings in the proceedings [102] .

According to the Court, the patent holder will have to establish the existence of confidentiality interests worthy of protection; the mere fact that comparable agreements are subject to confidentiality clauses does not per se justify limitations regarding to the extent of patent holder’s disclosure obligations [106] . On the other hand, the defendant will need to explain to the court why the information requested is required for assessing the FRAND conformity of the patent holder’s licensing offer [106] . The defendant will have to establish concrete facts, indicating a potentially discriminatory conduct of the SEP holder [107] .

With this in mind, the Court disagreed with the view expressed by the Duesseldorf courts, according to which the SEP holder is in any case obliged to produce all existing comparable agreements in infringement proceedings [108] . Especially in cases, in which the patent holder has concluded only standard licensing agreements with implementers, the terms and conditions of which are publicly accessible, the Court saw no reason for obliging the patent holder to produce a (large) number of identical contracts in the proceedings. Insofar, it will be sufficient to disclose how many (standard) licensing agreements have been concluded so far [108] .

Accordingly, the Court found that the list of existing licensees produced by Sisvel to Wiko along with the 2018 offer was sufficient for establishing the FRAND conformity of this offer, even though the names of the licensees were redacted. In the Court’s eyes, Wiko had failed to explain the reasons why the identity of the existing licensees was needed to assess the FRAND conformity of the 2018 offer [109] . In addition, the Court also took into account the fact that Wiko had refused to sign the NDA offered by Sisvel during the stay of the proceedings for the purpose of disclosing the identities of the existing licensees [110] . Since it had no objections against the FRAND conformity of the 2018 offer, the Court did not rule on the question whether Wiko’s refusal to enter into an NDA could be considered as a sign of unwillingness to comply with the Huawei framework or not. The Court agreed, however, with the view taken by the Duesseldorf courts in this respect, according to which the implementer’s refusal to sign an adequate NDA is, in principle, a factor that should be considered in connection with the assessment of the SEP holder’s offer [110] .

Besides that, the Court also considered the possibility of facilitating the use of comparable agreements in infringement proceedings through document production orders issued by the competent court pursuant to Sec. 142 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO) [107] . This option should particularly be taken into account by infringement courts in individual cases, in which confidentiality clauses contained in comparable agreements allow for a disclosure of the agreement only upon court order. According to the Court, such confidentiality clauses do not per se violate antitrust law and should, therefore, be respected, unless the patent holder cannot establish a confidentiality interest worthy of protection in the proceedings [107] . If the patent holder, who is bound to a confidentiality clause, is willing to produce comparable agreements in trial, then the infringement court could – based on the concrete circumstances of each case– issue a document production order according to Sec. 142 ZPO [107] . In case that the patent holder refuses to comply with such order, the court could consider the respective behaviour as a signal of bad faith in its overall assessment of the parties’ conduct under the Huawei framework [107] . The same will apply also when the implementer does not agree with a stay of the proceedings, after it was granted access to comparable agreements based on a court order issued pursuant to Sec. 142 ZPO [107] .

Implementer’s counteroffer

The Court found that Wiko had failed to meet its Huawei obligation to make a FRAND counteroffer to Sisvel in due course. For the respective assessment, the Court focused on Wiko’s reaction to the 2018 offer [111] .

The Court made clear that an implementer has a duty to react to a licensing offer of the SEP holder, which is based on concrete facts, irrespective of whether it considers this offer to be FRAND, or not (which will usually be the case) [107] . Furthermore, the implementer must react as soon as possible, considering the facts of each case, the industry practice in the specific sector as well as the principle of good faith [91] .

Taking into account that Wiko did not react at all to the 2018 offer for more than three months, the Court held that it violated the above obligations [87] . In the Court’s eyes, Wiko engaged in delaying tactics [87] . The Court did not accept that French school holidays and/or the fact that – according to Wiko’s own statement– only two employees covered licensing-related matters can provide sufficient justification for the delay in Wiko’s reaction [111] . As a company engaging in international business, Wiko should ensure that it has sufficient staff resources to deal with respective issues in due course [111] .


C. Other important issues

Apart from Sisvel’s claims for injunctive relief and the removal and destruction of infringing products from the market, the Court also rendered a declaratory judgment, recognising Wiko’s liability for damages on the merits [112] .

The Court found that Wiko had culpably infringed the patent in suit. In particular, Wiko had acted, at least, negligently [112] . Wiko had argued that the high complexity of standardised technologies (especially the significant number of patents incorporated into a standard), made it difficult to assess the status regarding intellectual property rights (and, therefore, excluded negligence). The Court made, however, clear that a higher degree of complexity of the underlying technologies generates enhanced due diligence requirements on the implementers’ side [113] .

  • [85] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16.
  • [86] Ibid, pages 17-31.
  • [87] Ibid, page 46.
  • [88] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case-No. C-170/13.
  • [89] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 42.
  • [90] Ibid, page 43 and page 51 et seq.
  • [91] Ibid, page 42.
  • [92] Unwired Planet v Huawei, Court of Appeal of England and Wales, judgment dated 23 October 2018, [2018] EWCA Civ 2344, para 282.
  • [93] Philips v Asus, Court of Appeal of The Hague, 7 May 2019, Case-No. 200.221 .250/01.
  • [94] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 44.
  • [95] Ibid, page 44.
  • [96] Ibid, page 37.
  • [97] Ibid, pages 47 and 53.
  • [98] Ibid, page 38.
  • [99] Ibid, pages 37 et seq.
  • [100] Sisvel v Wiko, District Court of Mannheim, 4 September 2019, Case-No. 7 O 115/16, page 39.
  • [101] Ibid, page 39.
  • [102] Ibid, page 40.
  • [103] Ibid, page 53.
  • [104] Ibid, page 54.
  • [105] Ibid, page 55.
  • [106] Ibid, page 40 and 49.
  • [107] Ibid, page 41.
  • [108] Ibid, page 49.
  • [109] Ibid, page 50.
  • [110] Ibid, page 51.
  • [111] Ibid, page 47.
  • [112] Ibid, page 35.
  • [113] Ibid, page 35 et seq.

Updated 15 October 2021

LG v TCL

LG Mannheim
2 March 2021 - Case No. 2 O 131/19

A. Facts

LG is a global electronics company headquartered in South Korea, holding a portfolio of patents declared as (potentially) essential to the practice of wireless telecommunications standards (standard essential patents, or SEPs), including 4G/LTE developed by the European Telecommunications Standards Institute (ETSI). ETSI requires from patent holders to commit to make SEPs accessible to users on fair, reasonable and non-discriminatory (FRAND) terms and conditions.

TCL is a Chinese manufacturer of electronic devices which imports and sells – among other things – mobile phones complying with 4G/LTE in Germany.

In March 2016, LG sent a letter to the parent company of the TCL group with information about its SEP portfolio. Until August 2018, LG sent in total seven similar letters to different companies within the TCL group. TCL did not react to these letters. In March 2018, LG also shared a licensing offer with TCL, which provided for running royalty payments. Again, TCL did not respond.

In November 2019, LG filed an infringement action against TCL before the District Court of Mannheim (Court). In January 2020, after the suit was filed, TCL contacted LG for the first time. In the following, the parties negotiated a Non-Disclosure Agreement (NDA), which was signed only in May 2020. Apart from that, several meetings and communications took place, in which LG provided information about its SEP portfolio as well as about existing licensing agreements to TCL. On the other hand, TCL shared information about past sales volumes. In June 2020, TCL brought up a licensing agreement between LG and Qualcomm that had expired in December 2018 (Qualcomm licence) in the negotiations. Qualcomm supplied TCL with chipsets. TCL argued that with respect to chipsets supplied by Qualcomm and covered by the Qualcomm licence LG's patent rights were exhausted.

In July 2020, LG made a modified licensing offer to TCL that provided for a lump sum payment (instead of the running royalty payments initially offered). TCL did not accept this offer.

In November 2020, TCL made a counteroffer to LG. The counteroffer was based on a running royalty regime. With a view to the Qualcomm licence, TCL requested to include a clause in the agreement, which would allow TCL to exclude phones with chipsets acquired by suppliers already licenced by LG from the royalty calculation.

Shortly afterwards, LG made another offer to TCL that corresponded to a large extent to TCL's counteroffer. LG proposed certain amendments with respect to the royalty calculation (e.g. the addition of caps and floors) and also removed the aforementioned clause, which would have allowed TCL to exclude a number of devices sold from royalty payments.

In December 2020, TCL indicated that it would prefer a lump sum payment. Subsequently, LG made minor modifications to its previous offer. However, the parties did not reach agreement.

In January 2021, TCL placed a security payment covering sales in Germany since 2016 (including devices with Qualcomm chipsets) and rendered accounts for past sales as well.

With the present judgment [114] , the Court found in favour of LG and -among other claims- granted an injunction against TCL.
 

B. Court's reasoning

The Court found that the patent in suit is valid and infringed. [115]

The Court further held that the claim for injunctive relief asserted by LG was enforceable. [116] LG had met the obligation to adequately notify TCL about the infringement of its SEPs prior to filing the present action and had also provided TCL with a FRAND-compliant offer. [117] On the contrary, TCL had failed to adequately express willingness to obtain a FRAND licence from LG. [118]
 

Notification of infringement

The Court took the view that by the first letter dated March 2016 (or, ultimately, by the licensing offer presented in March 2018), LG had sufficiently notified TCL about the infringement of the SEP in suit prior to initiating court proceedings. [119]

The fact that the letter of March 2016 was addressed to the parent company of the TCL group (and not the individual affiliates sued in the present proceedings) was not harmful [120] . According to the Court, addressing such type of letter to the parent company corresponds to the common practice in FRAND negotiations. [120]

Furthermore, the Court did not express concerns against the fact that the letter dated March 2016 did not indicate the number of the patent in suit, but instead contained only the underlying patent application number. [121] The Court noted that by making a search in the respective database of the European Patent Office, TCL could have been able to identify that the patent in suit had been granted and published. [121] Considering this, the Court highlighted that SEP holders are under no obligation to regularly update lists displaying the individual patents included in their portfolio. [121]
 

Willingness

According to the Court, TCL failed to sufficiently express willingness to obtain a FRAND licence. [122] An implementer is required to declare 'clearly and unambiguously' as well as 'seriously and unconditionally' that it is willing to conclude a licence agreement with the SEP holder on FRAND terms and, subsequently, engage in negotiations in a 'target-oriented' manner. [123] By contrast, it is not sufficient in response to the notification of infringement to just demonstrate willingness to consider signing a licensing agreement or to enter into negotiations about whether and under which conditions taking a licence comes into question. [123]

For the assessment of willingness, all circumstances should be taken into account, especially the behaviour of the implementer. [124] In particular, courts must examine whether the implementer's conduct 'reasonably promotes negotiations.' [125]

In the Court's eyes, timing in negotiations is an important factor: The implementer is regularly required to react in due course; did it refrain from expressing interest in a FRAND licence over a longer period of time, then the implementer must make 'additional efforts'. [126] In exceptional cases, a 'reluctant involvement' of the implementer in negotiations could be justified, for instance when the SEP holder itself does not engage in a target-oriented manner in the discussion (e.g. by not sharing information about its licensing practice). [127] In case that the SEP holder has made a licensing offer, the implementer should raise any concerns swiftly and not hold back potential objections for use in subsequent court proceedings. [125]

Furthermore, the implementer's counteroffer shall also be considered in the assessment of willingness. According to the Court, an implementer who – after having received a licensing offer as well as sufficient information from the SEP holder – makes a non-FRAND counteroffer indicates, as a rule, that it has no intention to reach a FRAND solution. [125] The same can apply, when the implementer insists on its counteroffer and refuses any improvements. [125]

Against this backdrop, the Court found that, in overall terms, TCL did not adequately promote the negotiations with LG. [128] The Court noted that TCL made no efforts to clarify whether, respectively to what extent the Qualcomm licence led to a (partial) exhaustion of LG's patent rights [129] . The Qualcomm licence was mentioned by TCL for the first time in June 2020 (approx. 4 years after the first contact in March 2016) and was brought up again only during the pending trial in November 2020. TCL then rejected several offers of LG to elaborate further on this issue. In the view of the Court, TCL should have tried to address this issue much earlier and in a more transparent way, particularly since the wording of the Qualcomm agreement hardly supports TCL's exhaustion argument.Ibid, para. 147. The Court found that the Qualcomm licence did not lead to the exhaustion of LG's patent rights in the present case, see paras. 95-104.

The Court also saw an indication of delaying tactics in the fact that TCL had changed opinions (especially with respect to the preferred royalty regime) in several occasions, without having processed information shared by LG on the merits. [131] A further indication of delaying tactics was the fact that TCL, as a rule, aligned its behaviour in the negotiations with developments in the pending infringement trial (e.g. TCL contacted LG for the first time only after the action was served and made its counteroffer shortly before an oral hearing in the proceedings). [132] The Court noted as well that it took TCL almost four months to sign the NDA with LG, although it should have undertaken additional efforts to promote negotiations, given that at that point in time TCL had already delayed the beginning of the negotiations with LG for several years. [133]

In addition, the Court considered the fact that TCL had made a non-FRAND counteroffer to LG as a further indication that TCL had not sufficiently engaged in the licensing negotiations. [134] According to the Court, TCL's counteroffer was not FRAND, because the 'commercially significant' question whether the Qualcomm licence caused a (partial) exhaustion of LG's patent rights was left aside to be addressed in subsequent negotiations or court proceedings between the parties. [135]

The Court highlighted that FRAND is, in principle, a range; FRAND can differ from sector to sector and over time and shall be determined based on the individual circumstances of each case in good faith bilateral negotiations between the parties. [136]

In the view of the Court, a counteroffer that leaves a controversial question with 'significant impact' on the amount of the royalties payable unanswered is, regularly, not appropriate. [137] By signing a licensing agreement on that basis, the implementer would legitimize the use of the patents (and, consequently, no longer face the risk of an injunction), while, at the same time, preserve the right to withhold part of the royalty payments until the disputed question has been answered in future negotiations or court proceedings. [137] Such a counteroffer would resemble an offer pursuant to Section 315 of the German Civil Code, which – according to the Court – is also not sufficient for establishing implementer's willingness to enter into a FRAND licence. [138] Insofar, the Court pointed out that in Huawei v ZTE [139] the Court of Justice of the EU required from the implementer to make a 'specific counteroffer', which implies that the royalties must either be defined in the counteroffer itself or can be determined in due course. [140]

In the present case, TCL had preserved the right to exclude mobile phones with Qualcomm chipsets sold until the expiration of the Qualcomm licence from the calculation of the release payment covering past sales. From LG's perspective, this left the key question open whether TCL was prepared to pay royalties calculated under consideration of the respective mobile phones or not. This question was significant, since – according to the Court – the exclusion of mobile phones with Qualcomm chipsets could lead to a significant reduction of the amount of the release payment, given that such handsets accounted for a substantial share of the overall TCL sales. [141]
 

SEP holder's offer

The Court further found that LG could not be held responsible for TCL's missing willingness to obtain a FRAND licence; on the contrary, LG had met all its conduct obligations. [142] In particular, the Court pointed out that LG had made several FRAND-compliant licensing offers to TCL and had also been prepared to adapt its offers for the benefit of TCL. [142]

The Court held that the royalties suggested by LG (especially in its final offer) led to a total royalty burden within the frame generally accepted within the wireless telecommunications sector. [143] Furthermore, the fact that LG had concluded two licensing agreements with other implementers on the terms offered to TCL was considered by the Court as an indication that said terms are not 'evidently non-FRAND', even though LG had not formed a standard licensing programme established in the market yet. [144]
 

Provision of security

Having found that TCL had acted as an unwilling licensee, the Court did neither examine whether the amount of the security payment provided by TCL (that covered past sales only in Germany) was sufficient nor whether this payment was belated or not. [145]

  • [114] LG v TCL, District Court of Mannheim, 2 March 2021, Case-No. 2 O 131/19 (cited by GRUR-RS 2021, 6244).
  • [115] Ibid, paras. 49-104
  • [116] Ibid, paras. 111 et seqq.
  • [117] Ibid, paras. 117 and 158 et seqq.
  • [118] Ibid, para. 117.
  • [119] Ibid, para. 118.
  • [120] Ibid, para. 121.
  • [121] Ibid, para. 122.
  • [122] Ibid, para. 123. et seqq
  • [123] Ibid, para. 124.
  • [124] Ibid, para. 125.
  • [125] Ibid, para. 126.
  • [126] Ibid, para. 127.
  • [127] Ibid, para. 128.
  • [128] Ibid, paras. 129-130 and 142 et seqq.
  • [129] Ibid, paras. 144 et seqq.
  • [130] Ibid, para. 147. The Court found that the Qualcomm licence did not lead to the exhaustion of LG's patent rights in the present case, see paras. 95-104.
  • [131] Ibid, paras. 152 et seq.
  • [132] Ibid, para. 154.
  • [133] Ibid, para. 155.
  • [134] Ibid, paras. 129 et seq.
  • [135] Ibid, para. 130.
  • [136] Ibid, para. 132.
  • [137] Ibid, para. 133.
  • [138] Ibid, para. 134. Under Section 315 of the German Civil Code the patent holder can be granted the right to unilaterally determine the royalties payable under the licence. The implementer preserves, however, the right to challenge such determination before court. The final amount of the royalty payable will, ultimately, be decided by the court in trials following the conclusion of the licensing agreement.
  • [139] Huawei v ZTE, Court of Justice of the EU, judgment dated 16 July 2015, Case No. C-170/13.
  • [140] LG v TCL, District Court of Mannheim, 2 March 2021, Case-No. 2 O 131/19, para. 133.
  • [141] Ibid, paras. 136 et seq.
  • [142] Ibid, para. 157.
  • [143] Ibid, para. 160.
  • [144] Ibid, para. 161.
  • [145] Ibid, para. 156.